Bank created credit represents the most elastic element in the supply of money. As hundreds then thousands of banks failed between 1929 and 1933, the economy's credit and therefore Money supply began to dry up. Also, as banks went down, they often took local businesses with them as they called in business loans in a desperate effort to stay above. All of this never ending circles of bankruptcies, job lay offs and curtailed consumption. The government did not insure bank deposits, so if a bank collaspsed, customers including who didnt invest in the stock market lost alot of their savings. The failures in 1929 through 1930 created a crisis of confidence in the banking system. Most Banks make profit by lending money from the depositors and collecting interest on the loans. If too many people withdraw thier moeny, the bank will collapse. FACT: More then 10% of the nations banks, nearly 3,500 had all closed by 1932.
Bank created credit represents the most elastic element in the supply of money. As hundreds then thousands of banks failed between 1929 and 1933, the economy's credit and therefore Money supply began to dry up. Also, as banks went down, they often took local businesses with them as they called in business loans in a desperate effort to stay above. All of this never ending circles of bankruptcies, job lay offs and curtailed consumption. The government did not insure bank deposits, so if a bank collaspsed, customers including who didnt invest in the stock market lost alot of their savings. The failures in 1929 through 1930 created a crisis of confidence in the banking system. Most Banks make profit by lending money from the depositors and collecting interest on the loans. If too many people withdraw thier moeny, the bank will collapse. FACT: More then 10% of the nations banks, nearly 3,500 had all closed by 1932.
The Depression's impact on the economy
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